January 17, 2022

NM cannabis regulators temporarily increase production limits in an attempt to avoid shortages

With a little more than two months before recreational-use cannabis sales are expected to start, the New Mexico Cannabis Control Division issued an emergency rule change that doubles plant limits for cultivators. 

The emergency rule change, which went into effect last Thursday, increases the maximum amount of mature cannabis plants for producers from 10,000 to 20,000. 

In documents filed with the state’s Commission of Public Records, division director Kristen Thomson justified the emergency rule change. 

“The Division has considered demand estimates provided by applicants and licensees in the cannabis industry,” Thomson wrote. “Projected market demand shows that the demand for regulated cannabis will increase year-to-year as more cannabis consumers move from the illicit market to the regulated market. The supply of medical cannabis will become increasingly threatened without an adequate supply of plants.” 

Cannabis production limits have been an issue in New Mexico since nearly the inception of the state’s Medical Cannabis Program. One of the state’s more prominent cannabis producers, Ultra Health, has battled with the state in court for years over plant limits. In 2015 the New Mexico Department of Health, which oversees the Medical Cannabis Program, increased production limits from 150 to 450 mature plants, per producer. Soon after that, Ultra Health took the Department of Health to court, arguing that 450 plants per producer was not enough to serve the tens of thousands of medical cannabis patients in the state at that time. A state district judge ultimately ruled that the Department of Health did not base production limits on definitive data and ordered the department to do so. In 2019 the Department of Health increased plant limits to 1,750 and after the Cannabis Regulation Act went into effect in 2021, the state’s Regulation and Licensing Department further increased production limits, allowing producers a maximum of 10,000 mature plants. Later in 2021, Ultra Health again challenged the plant limits among other rules promulgated by the Regulation and Licensing Department. The latest court challenge is still pending and state regulators have until Jan. 24 to file a response. 

Ultra Health’s president and CEO Duke Rodriguez told NM Political Report that while he expects increased production to result in lower prices, the issue could have been addressed months, if not years, ago. 

“Imagine all the plant count litigation we could have avoided, all the false claims by alarmists about overproduction from within the industry, the Legislature, and the regulators,” Rodriguez said. “The big fear now is the late timing of this decision and whether this is a long-term decision to encourage producers to immediately commit capital to buildings, upgrades, land and people.”

The general consensus among cannabis producers in New Mexico is that it takes at least four months to fully grow a cannabis crop, although that does not necessarily account for the time it takes to dry, cure, package and test products. It could take longer if the cannabis goes through a manufacturing or extraction process. 

Rodriguez ultimately praised the decision to increase production limits, but also criticized the Department of Health, which oversaw all cannabis production until June 2021. 

“The biggest shame in this emergency rule dates back to the complete mismanagement of the medical program by NMDOH,” Rodriguez said. “Credit to RLD for having the courage to set aside the stupidity and callousness of the past.”

The emergency rule change is only effective until July, but Thomson said in a statement on Monday that the temporary change is designed to help kick-start the new industry.

“We have been listening to producers, consumers and patients who are as committed as the Cannabis Control Division is to supporting a thriving cannabis-industry in New Mexico,” Thomson said. “Doubling the plant count for licensed producers makes sense to ensure that everyone can maximize the benefits of a thriving cannabis industry.”

Since production limits for microbusiness licenses are written into law and not rules, the emergency rule change will not impact those microbusiness license holders. Thomson, in her statement, said her division will work with legislators and Gov. Michelle Lujan Grisham to increase production limits for microbusiness licensees by amending the Cannabis Control Act. 

“Equity and fairness are foundational principles of New Mexico’s vision for the state’s cannabis industry,” Thomson said. “We will work with legislators and the governor to

ensure those values are upheld and that micro-producers see increased plant count

limits as soon as possible.”

But not everyone in the cannabis industry agrees that increasing plant limits two months before sales are set to begin is a good idea. Ben Lewinger, the executive director of the New Mexico Cannabis Chamber of Commerce, praised the Cannabis Control Division for considering possible cannabis shortages that would impact the more than 100,000 current medical cannabis patients.  

“Protecting patients and patient supply is absolutely critical and has been a first-order priority through recent legislative and rulemaking processes, and we’re grateful that the Cannabis Control Division is working to ensure that medical cannabis patients aren’t neglected as the state shifts to legalized cannabis for adults,” Lewinger said. 

But, Lewinger added, doubling plant limits through rules now “undermines the work of

legislators and advocates” who pushed for production limits in the name of creating a fair playing field of industry newcomers. 

“Building the infrastructure to double plant count could take months to years for most operators, and plants put in the ground today won’t be ready in April,” Lewinger said. “Increasing the plant count now will only help the very biggest and well-resourced producers – it won’t help medical cannabis patients and it won’t help new businesses trying to break into the industry.”

Many states that have legalized recreational-use cannabis faced product shortages of some kind during the early days of legal sales. As of Monday, there were 15 active cannabis production licenses and 17 active microbusiness licenses. Two businesses have been issued a cannabis manufacturing license and five businesses have been licensed for retail sales.